The Housing Bubble

A report from the Financial Times on New York. “Home sales have slowed down this year in the Hamptons, bringing the median price below the $1m mark. Second-quarter sales fell 12.8 percent from 2017 levels, according to data prepared for Douglas Elliman by Miller Samuel Real Estate. The median price dropped 5.3 percent to a $975,000, compared with $1.03m a year earlier. The spring selling season is usually the high point of the year in the Hamptons, so the drop is stoking concerns that the resort areas of Long Island’s south shore are succumbing to the pressures depressing property activity in other parts of the US. The inventory of homes listed at more than $4.25m rose 36.5 percent year on year in the second quarter to 329, according to Miller Samuel. Sales in the luxury market were down 11.6 percent from last year’s level.”

“‘The prices really ran up quickly and a lot of inventory built up,’ said John F Wines, a broker at Saunders & Associates in Southampton. ‘Now sellers have had to get a little more realistic.’”

“Judi Desiderio, chief executive at Town & Country Real Estate in East Hampton, said there is a ‘glut in the market,’ with pricing pressures most pronounced at the highest end. ‘Those homes are being brought down significantly,’ said Ms Desiderio. ‘We have seen houses listed at $15m brought down to $12m, and maybe trading at $9m or $10m.’”

The International Business Times. “Amid sky-high home prices, rising interest rates on mortgages and a shortage of entry-level listings, the demand for housing has dropped 9.6 percent in June from the same time last year, per a monthly index from Redfin. This is the most substantial decrease since April 2016. That decline came from a 2.2 percent decrease in the number of homebuyers requesting tours and a 12.2 percent drop in requests made on houses from May to June. The number of people demanding home tours also fell 6.1 percent annually in June and there were 15 percent fewer offers made on homes, the report said.”

“Places like Seattle and Washington, D.C., which both have a short supply of homes available, saw double-digit increases in homes for sale in June. However, homebuyer demand dropped 3.7 percent that same month in those cities. For the year, the demand decreased by 14.8 percent and by 14 percent respectively. That may be because buyers are a bit more frugal based on locale, experts say.”

“‘As much-needed large inventory increases finally arrive in some of the hottest markets, buyers are taking the opportunity to be choosy, offering only on well-priced homes,’ said Pete Ziemkiewicz, head of analytics at Redfin. ‘With more homes to go around, buyers don’t need to bid as aggressively to win bidding wars, so prices, while still growing, are growing a lower rate, and home sales are slowing.’”

The Star-Tribune on Minnesota. “After a bustling spring, homebuilders in the Twin Cities hit the pause button last month. Applications to build for-sale houses were nearly flat while rental apartment construction tanked, reversing a two-month trend. During July, 477 permits were issued to build 659 units, according to Housing First Minnesota. That was a 5.1 percent increase in permits from the same period a year ago, but a 40.4 percent decline in total units.”

“Ian Peterson, Twin Cities division president with David Weekley Homes, attributes the July pause to a strong spring that borrowed future demand. Talk of rising mortgage interest rates in the coming months also might have encouraged some to buy earlier in the year than they otherwise might. ‘Was it a typical July? I’d say a little slower,’ he said. ‘It wasn’t significantly slower.’”

The Philadelphia Inquirer in Pennsylvania. “Even before she and her husband started seriously house-hunting for their first home, Nicole Benson Paul had heard the stories of Philadelphia’s cutthroat real estate market. It would have been no surprise — understandable, even — for Paul and her husband, Zach, to succumb to the trend that has captured thousands of city residents in the last few years: diving head-first into the market, voraciously bidding for properties, and overpaying or waiving contingencies to obtain a home when necessary.”

“Instead, the Pauls are part of what Philadelphia real estate agent Ashley Lauren Farnschlader calls the new ‘wait-and-see’ buyers — a new category of house-hunters who are tired of searching, exhausted from bidding, and hesitant to go all-in on a house. Whether they are skeptical about where the market and economy are heading, recovering from buyer fatigue, or simply waiting to find the right home at the right price, many Philadelphia buyers are no longer clamoring for homes the same way they did in 2016 and 2017, local agents say.”

“‘Buyers are buying smarter,’ said Dylan Ostrow, an agent for Berkshire Hathaway HomeServices Fox & Roach in Center City, who helped the Pauls buy their first home in June. ‘I’ve told so many different clients … ‘We can wait for the right property. Something will come along priced correctly.’”

“For Paul, 29, and her 30-year-old husband, the patient approach paid off. In April, months after they had started shopping, the pair made their first serious bid — on a 1,400-square-foot rowhouse in Philadelphia’s popular Graduate Hospital neighborhood. The house had listed in the spring for $519,900 after sitting for months at $539,900. The couple swooped in and bid tens of thousands below the asking price. After negotiations, the Pauls nabbed the home for slightly more than $500,000, and settled in June.”

“Ordinarily, in the last few years, the Pauls’ experience would have been considered an uncommon steal in a highly sought-after neighborhood — a blip in an always ascending market. But the 2018 spring selling season was not the same real estate market that sellers, developers, and agents have enjoyed for the last few years, new data show, raising questions about where the Philadelphia real estate market could be headed.”

“According to Lawrence Yun, chief economist at the National Association of Realtors, the slowdown in Philadelphia and other cities is only ‘temporary’ and has been driven perhaps by rising interest rates or more first-time buyers seeking — and finding — lower prices. Other observers simply see it as sellers dropping their prices to attract today’s more cautious buyer.”

“‘Last spring we were selling anything… and now my sellers are, like, ‘What’s going on?’ said Mike McCann, a Center City real estate agent for Berkshire Hathaway HomeServices Fox & Roach. ‘We’re at the top of the bell curve, and we’re seeing softness. Sellers are talking about it. Agents who are entrenched in the market are seeing it. You just have to be more cautious now in your pricing.’”

The Del Mar Times in California. “After heavy debate for the last year-and-a-half and a gridlocked last meeting, the Encinitas City Council must now make its decision on one of its most pressing issues two days before the county’s deadline to qualify for the November election. The city will have to lock in its housing element update and the ordinance’s wording for the ballot at its next meeting on Aug. 8.”

“Over the last year-and-a-half, residents have packed city council chambers late into the night, advocating for and disapproving of proposed sites, height restrictions and other elements of the document. One of the most contested properties — a 7.6-acre, city-owned site best known as L-7 and located at 634 Quail Gardens Lane — was removed in mid-April following complaints from neighbors of the nearby Quail Gardens neighborhood. Those residents complained of an oversaturation of affordable housing in the area.”

The Lawrence Journal-World in Kansas. “A local developer has withdrawn his plans to build a five-story mixed-use condominium building in downtown Lawrence. The developer of the Vermont Place project, Bob Schumm, said he decided to abandon the project as proposed because not enough people were interested in purchasing a condo. Schumm said he did not want to build a speculative project and therefore planned to pre-sell all 11 of the condos before moving forward. He said that after spending the last 10 months marketing the condos, he had pre-sale agreements for only three units.”

“Regarding why there was not more interest in the condos, Schumm said he thinks the main reason was cost, especially in comparison with existing housing in Lawrence. He said the sales price of an unfinished condo in Vermont Place was $295 per square foot, as compared with about $150-200 per square foot in the existing housing market in Lawrence.”

“‘That’s what you’re faced with, is the competitive pressure of existing housing space versus condo space,’ Schumm said. ‘If we had a much larger urban footprint with other condos in it, then there would be a condo market where you could say, yeah, that’s about what it cost to do this.’”